251/08/2025-GST — Clarification on various doubts related to treatment of secondary or post-sale discounts under GST
Summary
This circular, issued by the CBIC on September 12, 2025, aims to clarify how GST applies to discounts given after a sale has already happened – often called post-sale discounts, or secondary discounts.
Essentially, the circular addresses confusion about whether these discounts reduce the original taxable value and therefore affect the GST paid. The crucial point is that GST implications depend entirely on the agreement between the supplier and the recipient before or at the time of the original sale.
If the post-sale discount was agreed upon before or at the time of sale and is clearly linked to specific invoices, and the recipient (buyer) has reversed the corresponding input tax credit (ITC), then the supplier can reduce their taxable value and claim a refund or adjust their GST liability. They must issue a credit note reflecting the discount and ITC reversal.
However, if the post-sale discount wasn’t pre-agreed upon, or if it's not clearly linked to specific invoices, then it's treated as a supply by the recipient to the supplier, taxable as a supply of service, and requires separate documentation.
This circular affects businesses giving or receiving post-sale discounts, particularly manufacturers, distributors, and retailers. Businesses need to review their discount schemes and ensure proper documentation and ITC reversal where required to comply with GST laws. There are no specific deadlines mentioned in the circular itself, but businesses must implement these guidelines for all post-sale discounts applied after September 12, 2025.
Key Changes
| Change | Impact |
|---|---|
| Clarification on Secondary Discounts (not pre-agreed): If discounts are provided *after* supply without being part of a prior agreement/contract, they will not be deductible from the value of supply for GST purposes. | GST will be payable on the original invoice value, and the supplier cannot reduce their tax liability based on these post-sale discounts. The recipient cannot claim ITC on the discounted amount. |
| Conditions for Discount to be Deductible: Discounts deductible from the value of supply under Section 15(3)(b) of the CGST Act, 2017, MUST be established as part of the agreement *at or before* the time of supply, *and* specifically linked to the relevant invoices. | Businesses need to ensure discount schemes are properly documented and linked to invoices *before* the supply takes place to avail GST benefits. |
| Treatment of Credit Notes: Credit notes can be issued even if discounts are not pre-agreed, *but* they won't affect the GST liability unless Section 15(3)(b) conditions are met. They are essentially commercial adjustments. | Businesses can still issue credit notes for commercial reasons, but these notes will not automatically reduce the GST payable unless pre-agreed conditions are fulfilled. This affects reconciliation. |
| Distinction between Discounts and Incentives: The circular likely clarifies (based on preceding circulars this is based on) that certain post-sale incentives might be considered separate supplies if they involve reciprocal obligations from the recipient, and therefore subject to GST separately. | Businesses need to carefully analyze their post-sale incentive programs to determine if they constitute a separate supply, requiring a separate GST invoice. |